Planning permission to turn part of Fargate Court - the offices above Paperchase and jeweller H.Samuel on Fargate - into nearly 50 student apartments was approved by the council in May last year.
But the site remains shrouded in white tarpaulin and scaffolding that also extends along Chapel Walk, which has its entrance next to Paperchase. It is understood no work has been carried out by the developer since November, a delay believed to be linked to questions about cladding in the wake of the Grenfell Tower disaster.
Carl Dunne, owner of the Cards & Gifts shop on Chapel Walk, said: "They promised to keep shopkeepers informed which they have not, and at this moment in time the promised removal of the scaffolding by October is only a distant memory. We are going to face another Christmas with this in place, affecting sales."
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He added: "On top of the issues of a downturn in business we are also seriously suffering with antisocial behaviour. The number of instances of shoplifting has soared and, daily, people are passed out in the enclosed doorways on Spice."
The council said it was 'very disappointed' by the lack of progress on the flats, and that it had been 'assured' by real estate firm Coyne that work will continue from next week.
And the city centre Business Improvement District - a body that runs initiatives funded by a levy on companies - said police and city centre ambassadors were dealing with rough sleepers and users of Spice, a type of synthetic cannabis known for its paralysing 'zombie' effect.
But Carl said: "There have already been victims. The regular Christmas pop-up shops stated they were so down on sales they wouldn't be opening up again this year."
There are several empty units on Chapel Walk, and the Cookshop Clearance outlet is closing soon too, albeit because of the retirement of its boss.
"I believe there are serious issues which are still not being resolved," Carl said.
Coun Mazher Iqbal, the council's cabinet member for business and investment, said: “We are very disappointed there have been delays to this privately-run scheme and our planning, highways and city centre team, as well as Sheffield BID, have all been working with the developer to move this situation on. We understand totally the concerns of traders.
“Our planning team says Coyne can continue to work on site and we have been assured that this will be happening from next week – which means the scaffolding can come down sooner.
“We do believe Chapel Walk has an excellent future, and as a council have invested heavily in it when we can, and a number of planning applications support our commitment to its future. We’d like to thank traders for the work they do in ensuring the street is still vibrant in these difficult circumstances.”
A spokeswoman for Sheffield BID said Spice was an issue 'across the UK' and that, locally, the organisation paid for police sergeant Matt Burdett and two ambassadors 'to help businesses and vulnerable people'.
Sgt Burdett, she said, manages a team of PCSOs in the city centre. "During their early morning rounds, they wake rough sleepers to allow businesses to access their premises. Rough sleepers are then offered support and directed to services that can help them.
“Chapel Walk receives three visits every day from city centre ambassadors and into the evening on weekends to ensure the shopping street is safe and attractive for visitors. Ambassadors work with businesses to tackle any issues that are affecting trade, and with Spice users to help guide them to support services."
Traders along the walk have received help to 'maintain the area's reputation and encourage footfall', she said. The BID has produced a printed guide with details of the arcade's shops, and last Christmas a unit became Santa's Post Office, a 'free, festive experience for families which generated 15,000 visitors'.
"Christmas shoppers were also able to enjoy festive windows and fairy lights on Chapel Walk during the festive season, provided by the BID to support the street during building works.”
Coyne was approached for comment.